Stable Currency

Introduction

USD has been known as strongest and most stable currency on this world and stably fluctuating in foreign exchange rate market. This paper will analyze about five currencies based on every week’s news for estimated 2 months – which consist of The Japanese Yen, The Russian Ruble, The European Euro, The Indonesian Rupiah and Australian Dollar.

The reason of selecting Yen in this report analysis because Japan is well-known of its unique pattern of trade invoicing. According to Grassman (1973), trade between two advanced countries tends to be invoiced in the exporters’ currency. But, in Japan, it is vice versa, Japan exporters have a strong tendency to choose the importer’s currency for their exports to advanced countries such as the US and EU (Ito, 2010).

The fundamental reason for ruble weakness nowadays is Russia's   macroeconomic weakness. The Russian ruble has plummeted to a record low in against the U.S dollar in January 2015 as the Ukrainian crisis revives Cold War-style tensions.  If the crisis is solved quickly, the damage will be limited and Russia can return to the much-needed business of solving its own economic problems.

As recorded in recent data, the Indonesian Rupiah is at Rp13,253.9 to one US dollar – a lowest recently. Indonesian exchange rate dominantly depends on the inflation rate, price changes in the oil market, and U.S economic data.

Week 1 (March 16th to March 22th) 

USD/JPY

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The Japanese Yen reached it highest currency in 120.07/USD on Sunday March 22th, 2015. It started appreciating by 0.70% from Monday to Friday.

When the Federal Reserve’s indicated the initial comment to raise interest rate in June gradually, the Yen keeps strengthening slightly against the USD. However, stronger yen damages Japanese exporters since makes them less competitive overseas and crumbles their profits when repatriated (Japanese shares lead Asian losses, 2015). But as the dust from the Fed statement settles, market watchers continue to expect a U.S. rate increase in summer, likely stoking the dollar’s upward momentum and keeping pressure on other currencies around the world. The Yen is forecasted to be stronger than USD next week due to the reduction in oil price.

USD/RUB

The Russian ruble appreciated against USD in recent week, strengthening from 62.25/USD to 59.3/US on March 16th, 2015 until March 22th, 2015.  The possible reason of the growth is because of western economic sanctions over the Ukraine crisis. With foreign goods unavailable, Russians had to choose homegrown products and services. (Winkler, 2015) Moreover, the growth was supported this by companies purchasing the currency to make tax payments. (Ruble strong: Russian currency no longer reacts to oil prices, foreign debt , 2015). It has been forecasted with the ruble may weaken, by the time when the tax season ends.